Character flaw or systems failure?

June 20, 2000

Ever since the fallen hero of South African Cricket - Hansie Cronje spilled his guts out to his country's inquiry commission and confessed to being bribed and throwing matches, many Indians have been most perplexed. They were equally astounded at the sort of details that Monica Lewinsky had provided to the American authorities in the case that shook the Presidency.

Why would they want to confess? Why should they want to make it easier for their investigative agencies? Why don't they adopt the Indian way of reacting to scams and do what our cricketers, politicians and scamsters do? That is - issue vehement denials; threaten to sue every one in sight; send out a few legal notices and hope that authorities do not manage to ferret out enough information to conclusively establish their guilt. This process buys crucial time to "influence" people in authority or "induce" officials in the vigilance agencies to ignore vital facts or delay filing a charge sheet.

The Indian system has worked wonderfully well for the last 40 years. Nobody has ever been punished for a significant offense in these decades and no one has ever had to disgorge substantial amounts of wealth - certainly not the rich and the famous. A large number of ordinary people are crushed mercilessly under the slow grind of the justice machinery - but small people in India suffer anyway, don't they? They are always the worst affected by natural calamities such as droughts and floods, they are trampled and butchered in caste and ethnic conflicts and are so often the sacrificial lambs for crimes ordered by the rich and the famous.

Let us look at how the system works for the influential minority. Hearing Hansie Cronje confess, a former bureaucrat told me, "I think it is a character flaw peculiar to us Indians that we simply do not admit any wrong doing." I disagreed vociferously. It is not a character flaw, but systemic flaws which effectively block any confessions.

Overcrowded courts, primitive systems, paucity of funds which hamper investigation, widespread corruption and an excruciatingly slow judicial process are all part of the systemic problem. A system of fixers works to grease the escape route and to engineer delays. They also do something even more dangerous. They decimate every upright official, bureaucrat, citizen and journalist who dares to buck the system, so that there are very few role models or an incentive to challenge corruption.

The Bofors gun deal is the most staggering example of how this works. Nearly a dozen different governments have been in power, since Rajiv Gandhi lost the elections in the wake of the scandal. It's been two decades, but the cosy world of Indian politics operates in such a manner that nobody dares to attack the skeletons in any cupboards, for fear of what may tumble out of their own.

Then came the Securities Scam of 1992. Politicians had marginal enough role to have ensured a clean and fair investigation. But it did not happen. The Narasimha Rao government came up with the perfect gimmick - an all-party Joint Parliamentary Committee (JPC) which conducted closed door hearings.

Most of its 30 members of Parliament (MPs) did not have the foggiest notion about business or financial matters. A few left party MPs who were serious about the investigation, unfortunately lost sight of the big picture and got caught up in a witch-hunt of individuals.

Eight years later, even the financial transactions remain tangled. Scores of civil and criminal cases have been filed in the Special Courts set up to investigate the scandal and though half a dozen judgements have been handed out, all the cases have gone into appeal to the Supreme Court.

In 1992, a repentant Harshad Mehta, the central figure in the scandal wanted to confess, pay up his dues, take his punishment and get on with life. He mistakenly believed that if he declared his vast assets and gave up extraordinary profits, the system would appreciate it. He even declared assets of nearly Rs 12,000 million.

Those days the Mehtas were approached by dozens of fixers who advised them not to confess. Everybody promised to hush up the scandal for a price and came up with detailed schedules of administrative decisions they would engineer to get them off the hook.

But the scandal was too big for a simple solution and Harshad Mehta far too central a figure to be let off without an uproar. But it is still significant that the State Bank of India case, which set off the unravelling of the scandal, was filed nearly four years after I broke the story on April 23, 1992 in The Times of India.

The Central Bureau of Investigation (CBI) did arrest a lot of people and jailed them during interrogation, but nobody has been jailed after a trial.

After 1992, liberalisation and deregulation of the economy led to several scandals as companies cashed in on their new freedom to take gullible investors for a ride. A set pattern has now evolved for handling these investigations and pushing them into limbo. The collapse of the Rs 10,000 million CRB Group led to the arrest of the group chairman for a few weeks. He is now out on bail and probably making a new career for himself in the dot com business. No case has been filed and investors have not recovered any money. In fact, a score of other companies also went under when investors panicked after the collapse of the CRB group.

The initial public offering (IPO) market also collapsed for four years from 1995 after several hundred companies made off with pubic money raised for projects which were never implemented. One investor association, with little hope of recovery is doggedly pursuing the case.

Another scandal of the same vintage was the plantation company cases. These too raised several thousand million rupees and collapsed. They had promised fantastic returns by growing teakwood and other products using new cultivation techniques.

Nobody has ever confessed to cheating in any of these cases. In fact, everyone has always maintained that they are the victims and someone else is to blame. The system allows them to trade and do business while maintaining this facade. After a couple of years, the newspapers lose interest and public memory which is notoriously fickle quickly fades. The lesson to all past and future scamsters and cheats is simple. If you confess, you would probably be cooling your heels in jail. If you do not, the system will ensure that nothing happens in your lifetime, so long as you have the spare cash to grease the right palms.